SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 232
[Release No. 33-7472; 34-39269]
Rule to provide that the Commission will not accept paper filings that are
required to be filed electronically
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
SUMMARY: The Securities and Exchange Commission is adding a rule to the
series of rules governing the submission of filings and other documents
through the Electronic Data Gathering, Analysis, and Retrieval system. The
new rule provides that the Commission will not accept any paper filing that
is required to be filed electronically, unless it satisfies the
requirements for a temporary or continuing hardship exemption.
EFFECTIVE DATE: The rule is effective on January 1, 1998.
FOR FURTHER INFORMATION CONTACT: Margaret R. Black, Division of
Corporation Finance, (202) 942-2933, or Ruth Armfield Sanders, Division of
Investment Management, (202) 942-0633, U.S. Securities and Exchange
Commission, Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: The U.S. Securities and Exchange Commission
(the "Commission") is adding new Rule 14 to Regulation S-T under
the Securities Act of 1933 ("Securities Act").
I. DISCUSSION
The Commission's filing rules mandate electronic filing by registrants
and certain others via the Commission's Electronic Data Gathering and
17 CFR Part 232.
15 U.S.C. 77a et seq.
Retrieval ("EDGAR") system. Most companies were phased into the
electronic system in groups between 1993 and 1996; by May, 1997, when small
business filers were completely phased into the electronic filing system,
all domestic issuers were required to file most documents
electronically. EDGAR filings are available on the Commission's
Internet web site within 24 to 48 hours of filing, and commercial databases
provide the information even sooner. The electronic filing system has made
filings more easily and more quickly available to the investing public.
Most filers either regularly and promptly submit filings via the EDGAR
system or apply for an exemption before the required filing date. The high
level of compliance with the rules requiring electronic filing draws
attention to the fact that some filers have continued to make their filings
in paper without requesting a hardship exemption. In May 1997, for
example, when approximately 23,750 filings were submitted electronically,
the Commission received approximately 8,850 paper filings, of which
approximately 500 should have been filed electronically. These
paper filings create a gap in the EDGAR database because all paper filings,
whether or not filed pursuant to an exemption, are currently accepted and
Rules 101 and 102 of Regulation S-T [17 CFR 232.101 and
17 CFR 232.102].
Rule 101(a) of Regulation S-T [17 CFR 232.101(a)]
specifically excepts "foreign private issuers and
foreign governments" from the persons and entities
subject to mandated electronic filing. In the future,
the Commission will consider whether such filings
should be required to be made electronically.
The other paper filings were filings from foreign
private issuers or foreign governments, filings
submitted in paper pursuant to a hardship exemption,
and filings on forms not yet required to be filed
electronically.
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treated as valid filings. The gap in the electronic database is
detrimental to an investing public that relies on the prompt availability
and dissemination of filed information. Those who rely primarily on the
EDGAR database may not even be aware that the information is on file with
the Commission.
The Commission's rules take into account the possibility that under
certain circumstances electronic filing may be difficult or impossible by
allowing filers relief from electronic filing through hardship exemptions.
Filers may claim or request, as appropriate, hardship exemptions based on
certain criteria, including, for example, technical difficulties in filing,
and undue burden and expense of conversion to electronic format.
A temporary hardship exemption, generally for unanticipated technical
difficulties, is available automatically but must be followed, within six
business days, by a confirming electronic copy so that the electronic
database is complete. A continuing hardship exemption is also
available, but must be granted by the staff. It may be granted for a
The Commission staff screens all paper filings to
determine if they should have been filed on EDGAR. If
the submission should have been filed electronically,
the staff calls or writes to the filer, and asks the
filer to file an electronic copy of the document, or to
apply for a hardship exemption if appropriate.
Rule 201 of Regulation S-T (temporary hardship
exemption) [17 CFR 232.201] and Rule 202 of Regulation
S-T (continuing hardship exemption) [17 CFR 232.202].
Rule 201 requires paper filings relying on the
temporary hardship exemption to be accompanied by a
Form TH, Notification of Reliance on Temporary Hardship
Exemption, and in the case of exhibits, Form SE, Form
for Submission of Paper Format Exhibits by Electronic
Filers.
======END OF PAGE 3======
specific period (after which a confirming electronic copy must be filed) or
for an indefinite period.
While the rules acknowledge the possible impediments to electronic
filing, they also impose sanctions on issuers that do not comply with the
electronic filing rules (and that fail to request an exemption, or fully
comply with the requirements of the exemption). The sanctions include the
inability to use certain short form registration statements,
the inability to incorporate the paper filing by reference into other
filings, and the tolling of certain tender offer
periods.
Neither the availability of the hardship exemptions nor the sanctions
provided by the rules have completely eliminated paper filings that are
filed inappropriately without a hardship exemption. The Commission
believes that there is a strong public interest in decreasing the number of
non-compliant filings. First, electronic filing makes information
Rule 202(a) states that requests for a continuing
hardship exemption must be submitted at least ten days
in advance of filing. Requests must be submitted by
either filers or their counsel, and the request may be
submitted by fax to the Office of EDGAR Policy in the
Division of Corporation Finance at (202) 942-9542.
Questions about hardship exemptions should be directed
to that Office at (202) 942-2940. Investment company
filers should direct their requests and inquiries to
the Investment Management EDGAR Branch at (202) 942-
0591.
See, e.g., Instruction I.H to Form S-2 [17 CFR 239.12].
Forms S-3 [17 CFR 239.13], S-8 [17 CFR 239.16b], F-2
[17 CFR 239.32] and F-3 [17 CFR 239.33] contain similar
provisions. See also the note to Rule 101(a) of
Regulation S-T [17 CFR 232.101(a)], Note 1 to Rule
201(b) of Regulation S-T [17 CFR 232.101(b)] and Note 3
to Rule 202(d) of Regulation S-T [17 CFR 232.101(d)].
Rule 303 of Regulation S-T [17 CFR 232.303].
Rule 13e-4(f)(12) [17 CFR 240.13e-4(f)(12)] and Rule
14e-1(e) [17 CFR 240.14e-1(e)].
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available more quickly than paper filing. The electronic filing system is
the most efficient and effective way of disseminating filed information to
the public. Each filing in paper format that is not the subject of an
exemption creates an information gap for a marketplace that has come to
rely on EDGAR for immediate and complete access. Second, it appears unfair
to those filers who comply with the filing rules to accept the filings of
those who do not. Finally, paper filings are more costly to the Commission
because they require more staff time to process, maintain, track and
retrieve. Paper filings prevent the Commission's staff from taking full
advantage of the efficiencies of electronic filing for processing, tracking
and staff review of filings. Paper filings also disrupt the continuity of
preserving records permanently in an electronic format.
The Commission has determined, therefore, that the EDGAR filing rules
should be revised to provide that documents that are required to be filed
electronically will not be accepted for filing in paper format in the
absence of an available exemption. In reaching this decision, the
Commission also considered that the phase-in period for electronic filing
has been complete for over a year, giving filers ample time to become
familiar with and to comply with the electronic filing requirements. The
Commission believes that a specific rule providing for the rejection of
non-compliant filings will help to decrease the number of paper filings.
The Office of Filings and Information Services will be instructed not to
accept paper submissions that should have been filed
electronically. Those brought by courier will be given back to
Filers submitting paper filings in reliance on a
hardship exemption must include on the first page of
(continued...)
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the courier, and those sent by mail or other delivery service will be
returned by mail. If a filing is required to be filed within a certain
period (e.g., ninety days from the end of the fiscal year for annual
reports on Form 10-K), the rejection of an improper paper filing would
result in a filer failing to meet its disclosure obligations unless the
document is submitted electronically by the due date.
The Commission is aware that the immediate result of returning a paper
submission will be that access to the information will be delayed until the
sender re-submits it in electronic format, because the filing will not be
available even in paper format through the Commission's public reference
facilities. In order to minimize this delay, the staff will use its best
efforts to notify senders of the problem promptly so they can take
immediate steps to re-submit the documents. As filers become accustomed to
this policy, improved compliance with the EDGAR rules can be expected. The
result will be an improvement in the timeliness of information available to
the public.
The Commission also considered whether to revise the rules providing
for sanctions. It has been argued that the current rules create an
inference that the Commission will accept paper filings because the penalty
is imposed in the event a filing is improperly submitted in paper format.
The Commission believes that the creation of a general rule providing for
(...continued)
the filing the legend stating that the filer is relying
on a hardship exemption. See Rule 201(a)(2) of
Regulation S-T [17 CFR 232.201(a)(2)] and Rule 202(c)
of Regulation S-T [17 CFR 232.202(c)].
The only date the Commission will consider in
determining compliance with the disclosure requirements
will be the filing date of the electronically
transmitted document.
======END OF PAGE 6======
the rejection of paper filings where the filing does not satisfy the
requirements of a hardship exemption will clear up any possible
misinterpretation of the rules. As with its other rules, the Commission
will use any appropriate means, including its authority to bring legal
actions, to enforce the electronic filing rules. In addition, keeping the
current sanctions will provide a backup system of penalties that would
apply to a paper filing that is accepted in error. The Commission
therefore believes that a change to the rules imposing sanctions is not
necessary or appropriate at this time.
II. EFFECTIVE DATE
The new rule is effective on January 1, 1998, and applies to filings
made after that date, including amendments to filings made earlier.
III. CERTAIN FINDINGS
Since the new rule relates solely to agency organization, procedure,
or practice, publication for notice and comment is not required under the
Administrative Procedure Act. It follows that the requirements
of the Regulatory Flexibility Act do not apply.
The new rule does not come within the scope of the Paperwork Reduction
Act of 1995 because the new rule is not a substantive or
material change to a collection of information.
Under 5 U.S.C. 804, this rule is exempt from the definition of the
term "rule" for purposes of Chapter 8, entitled "Congressional Review of
Agency Rulemaking," since the rule is a rule of agency organization,
5 U.S.C. 553(b).
5 U.S.C. 601-612.
44 U.S.C. 3501 et seq.
5 CFR 1320.5(g).
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procedure, or practice that does not substantially affect the rights or
obligations of non-agency parties.
Section 23(a)(2) of the Securities Exchange Act of 1934
(the "Exchange Act") requires the Commission to consider the
anti-competitive effects of any rules it adopts thereunder, if any, and the
reasons for its determination that any burden on competition imposed by
such rules is necessary or appropriate to further the purposes of the
Exchange Act. Because the new rule does not effect any substantive change,
it will not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Exchange Act.
IV. COST-BENEFIT ANALYSIS
The benefits of this new procedural rule clearly exceed the costs.
The amendment should benefit the investing public by increasing the number
of documents filed electronically and therefore the public's knowledge of
and timely access to the information in the documents. Based on filings
made in May of 1997, the rule could result in an additional 500 filings per
month being made electronically rather than on paper. This assumes that
all paper filings made without a hardship exemption would have been filed
electronically if the new rules had been in effect. Of course, it is
possible that one result of the rule will be that more filers will request
and receive hardship exemptions. However, any burden resulting from an
increase in applications for hardship exemptions is likely to be minimal
and only constitutes the costs of complying with an existing standard.
15 U.S.C. 78w(a)(2).
15 U.S.C. 78a et seq.
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Furthermore, Section 2 of the Securities Act and Section 3
of the Exchange Act, as amended by the recently enacted
National Securities Markets Improvement Act of 1996, provide
that whenever the Commission is engaged in rulemaking and is required to
consider or determine whether an action is necessary or appropriate in the
public interest, the Commission also shall consider, in addition to the
protection of investors, whether the act will promote efficiency,
competition, and capital formation. Because the amendments will increase
the amount of information available on a timely basis to the investing
public, the new rule is in the public interest and will promote the
efficient dissemination of such information. The new rule will not affect
efficiency, competition or capital formation because it does not result in
a material change in capital raising or regulatory compliance costs.
V. STATUTORY BASIS
The rule is proposed pursuant to Sections 6, 7, 8, 10 and 19(a) of the
Securities Act, Sections 3, 12, 13, 14, 15(a), 23(a) and 35A of the
Exchange Act, Sections 3, 5, 6, 7, 10, 12, 13, 14, 17 and 20 of the Public
Utility Holding Company Act of 1935, Section 319 of the Trust
Indenture Act of 1939, and Sections 8, 30, 31 and 38 of the
Investment Company Act of 1940.
List of Subjects in 17 CFR Parts 232
15 U.S.C. 77b.
15 U.S.C. 78c.
Pub. L. No. 104-290, 106, 110 Stat. 3416 (1996).
15 U.S.C. 79a et seq.
15 U.S.C. 77aaa et seq.
15 U.S.C. 80a-1 et seq.
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Administrative practice and procedure, Reporting and recordkeeping
requirements, Securities.
TEXT OF THE AMENDMENTS
In accordance with the foregoing, Title 17, Chapter II of the Code of
Federal Regulations is amended as follows:
PART 232 -- REGULATION S-T - GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
1. The authority citation for Part 232 continues to read as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 78c(b),
78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-29, 80a-30 and
80a-37.
2. By adding 232.14 to read as follows:
232.14 Paper filings not accepted without exemption.
The Commission will not accept in paper format any filing required to
be submitted electronically under Rules 100 and 101 of Regulation S-T
(232.100 and 232.101 respectively), unless the filing satisfies the
requirements for a temporary or continuing hardship exemption under Rule
201 or 202 of Regulation S-T (232.201 or 232.202 respectively).
By the Commission.
Jonathan G. Katz
Secretary
Dated: October 24, 1997
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